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China: The Great Brawl

June 15, 1997

News: Analysis & Commentary

CHINA: THE GREAT BRAWL

U.S. companies battle a new,vigorous threat to Beijing's trade status

Representative Todd Tiahrt (R-Kan.) knows Boeing Co. And Boeing knows him. Tiahrt's Wichita district is home to the airplane maker's second-largest plant, which employs 18,000. He worked as a manager there for 14 years. These days, he talks to Boeing lobbyists "once a week, sometimes daily," says Tiahrt. "They never fail to bring it up." "It" is the issue that has Boeing lobbyists--and hundreds of other business reps--mobilizing like mad: fighting a battle to extend most-favored-nation trade status for another year to the People's Republic of China.

Small wonder that the No.1 U.S. exporter is all over Tiahrt. He supported MFN for the past two years but is now warning the GOP leadership: "Don't count on me" when a vote comes up in July to maintain China's tariff rates at 6% instead of the 44% levied on communist governments such as Cuba and North Korea. Before he approves MFN this year, he says, "I want to know what we are getting from the relationship besides a $40 billion trade deficit and promises about improvements in human rights and political freedoms."

Attitudes like that promise to make this year's MFN review the most drawn-out and heated battle over China policy in Washington since Tiananmen Square enraged Congress in 1989. The debate this year is complicated by the suspected Chinese link to Donorgate, the July 1 transfer of Hong Kong to Chinese rule, a steadily worsening trade deficit, and recent confirmation of Beijing's sales of missile and chemical-weapons technology to Iran. Also, an anti-MFN coalition of Christian conservatives, the AFL-CIO, and human rights activists has won dozens of converts on the Hill.

RETALIATION. MFN Opponents are vehement. Listen to Representative Dana Rohrabacher (R-Calif.): "The Chinese Communist government is an immoral, genocidal regime that doesn't deserve to be traded with on the same basis as Belgium or Italy or other democratic countries," he says. And Rohrabacher has 19,000 Boeing workers in his Southern California district.

The effort to revoke MFN has even united such political foes as House Minority Leader Richard A. Gephardt (D.-Mo.) and Senate Foreign Relations Committee Chairman Jesse Helms (R-N.C.). On June 3, both introduced legislation to block MFN renewal.

Few expect Congress to muster the two-thirds vote to overturn Clinton's renewal of China's MFN status, but the nastier-than-usual ruckus could inflame U.S.-China relations. And China has already shown it's willing to retaliate for perceived insults. In April, 1996, Premier Li Peng steered a $1.5 billion jet order to Europe's Airbus Industrie because, he explained, "they do not attach political strings to cooperation with China." CMI Corp. in Oklahoma City got the same message during last year's MFN debate when it sent $4 million worth of paving equipment to China but received no payment until the MFN vote in Congress. "There are plenty of other alternatives for the Chinese from other companies in other countries," worries CMI CEO G. William Swisher.

This year, Boeing believes it got a not-too-subtle signal from Chinese officials on May 15. As U.S. politicians and interest groups began talking about fighting MFN, the aircraft giant learned it had lost out on a $1.5 billion order for small jets. "The Chinese just bought 30 Airbus planes to reward Europe for not pushing human rights," says Ronald Woodard, president of Boeing's commercial airplane group. "The Europeans love the fight over MFN."

That's why the business lobby is frantically trying to win the debate as fast as possible. If U.S. pols spend weeks debating MFN, dredging up dirt that embarrasses the Chinese, "what is the U.S. going to gain?" asks an exasperated General Motors Chairman John F. Smith Jr., who has big plans for China (page 34). "China can do business with any other country in the world."

Corporate America has adopted a two-pronged strategy: a grassroots effort in the states and a Washington lobbying blitz. Business concedes Chinese misdeeds but insists that political freedoms will follow economic growth. "Only by continued engagement with the Chinese will we be able to exert the pressure for a more pluralistic and open society," says Pam Doonan of the Boeing-backed Kansas Alliance for U.S.-China trade. The Alliance is blanketing hometown congressional offices with letters, calls, and visits from small-business owners.

In the past three years, the Kansas group has grown from 20 to 120 companies, as the state's exports to China grew to $53 million in 1996, up from $6 million in 1990--mainly food, aircraft, and machinery. In California, some 350 businesses have formed the Coalition for U.S.-China Trade, which is getting small exporters to lobby their representatives in Congress. Lawmakers "need to understand what the cost would be at home from trade sanctions," says Martina Johnson-Kent, the coalition's director.

In the nation's capital, savvy pro-MFN lobbyists have set up a rapid-response effort. When House Speaker Newt Gingrich (R-Ga.) suggested extending MFN for just six months so U.S. lawmakers could monitor Hong Kong's treatment by China, business lobbyists helped enlist Hong Kong officials to condemn the move. Gingrich backed down. When Family Research Council President Gary Bauer criticized China for human rights violations and for shutting down churches, business lobbyists circulated statements from missionary organizations urging MFN renewal.

In the forefront is the 1,000-member Business Coalition for U.S.-China Trade. The umbrella group includes the National Association of Manufacturers, the National Retail Federation, the Business Roundtable, the National Foreign Trade Council, and the U.S. Chamber of Commerce. Nearly every midsize and large U.S. exporter is represented.

SEVEN GIANTS. Then there are company campaigns. Seven giants with the most at stake--Boeing, General Electric, AT&T, Westinghouse Electric, United Technologies, Dresser Industries, and Caterpillar--together disbursed close to $6.5 million in last year's federal elections, two-thirds of it to Republicans, the party most likely to support MFN. For this season's MFN campaign, companies are taking responsibility for key congressional delegations. Boeing is in charge of lobbying representatives from Washington, Kansas, and Alabama; TRW drew Ohio; United Technologies got Connecticut and Florida; and General Motors has Michigan, Georgia, and Texas. All the companies have targeted House Ways & Means Committee Chairman Bill Archer (R-Tex.).

The conservative Heritage Foundation is supplying the pro-MFN lobby's philosophical muscle. To counter Christian conservatives, Heritage has published papers in favor of MFN and a book on U.S. strategy toward China. Heritage officials have testified on Capitol Hill, supplied guests on radio talk shows, written newspaper columns, and even invited former Commerce Secretary Barbara H. Franklin and former U.N. Ambassador Jeane D. Kirkpatrick to lecture Hill staffers on MFN.

Chinese leaders are watching the effort closely. For now, they've softened their rhetoric so as not to spook investors during the Hong Kong transfer. Chinese officials are even offering an economic argument. Vice-Minister for Foreign Trade Sun Zhenyu said on June 1 that cancellation of MFN status is "a double-edged sword that hurts not only China but U.S. middle- and lower-income consumers as well as U.S. investors in China." If that's not enough to convince folks such as Todd Tiahrt, there's always Boeing's lobbying team.By Paul Magnusson in Washington, with Andy Reinhardt in San Francisco, Seanna Browder in Seattle, and bureau reportsReturn to top